Published: March 5, 2013 at 12:33 pm

It’s common for company insiders to talk up their company’s stock, but it’s less common for them to actually buy. This is because- in addition to the fact that rosy predictions are sometimes less than honest- by buying more stock an insider is increasing their exposure to company-specific events rather than diversifying their wealth as is predicted by economic theory. As a result actual purchases should signal a particularly confident insider rather than one who is casually buying the stock, and it turns out that stock bought by insiders do have a slight outperformance effect read our analysis of studies on insider trading). Of course it’s impossible to copy every insider purchase, but we like to take at least a brief look at significant buys so that investors can do more research on stocks that seem appealing. Here are five stocks insiders have bought recently:

Shona Brown, a member of PepsiCo, Inc. (NYSE:PEP)’s Board of Directors, bought 1,000 shares of stock at an average price of $75.33. The global beverage and snack company reported high earnings growth in the fourth quarter of 2012 versus a year earlier, but sales were actually down slightly and the current trailing earnings multiple looks a bit high at 20. We would want to see revenue growth before considering a purchase. Renaissance Technologies, whose success since inception has made founder Jim Simons a multi-billionaire, bought 2.6 million shares of Pepsi last quarter (see more stock picks from Renaissance Technologies).

Two insiders bought shares of The Cheesecake Factory Incorporated (NASDAQ:CAKE) generally between $34 and $35 per share. Consensus insider purchases are particularly likely- though not certain- to be bullish signals (learn more about consensus insider purchases). While earnings per share were up 9% in Q4 from levels in the fourth quarter of 2011, this was primarily due to buybacks with revenue and net income rising only 2-3%. Cheesecake Factory also trades at 20 times trailing earnings and while it’s good that the company is returning cash to shareholders we would be skeptical of this valuation as well.

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